“The danger is not that machines will become smarter than us, but that we will borrow heavily to make them so.” Geoffrey Hinton, deep learning pioneer
Big tech’s rising debt dilemma
Wall Street is increasingly uneasy about the rapid build-up of debt used to power the artificial intelligence infrastructure race. What worries investors is not AI spending itself but the historic scale of borrowing that now fuels it, raising new fears of an industry bubble.
Shift from cash comfort to risky leverage
Recently, most AI investments came from companies with strong balance sheets and steady cash flow. But that changed fast. Major players such as Amazon, Alphabet, Microsoft, Meta and Oracle have raised unprecedented sums, signalling a notable break from the more conservative financing patterns of earlier tech cycles.
Circular financing sparks investor anxiety!
Analysts say the reliance on leverage and the interconnected nature of AI-related financing deals add volatility. Wealth managers say this maturing phase of AI is likely to bring sharper swings in risk as companies continue to stretch their capital structures.
Oracle’s credit strain becomes a warning sign
Oracle, once seen as a stable database giant, has suddenly become a key barometer for AI-related credit stress. Its surge in borrowing, paired with weaker credit grades and tangled financing linked to its AI ambitions, has made its credit default swaps surge. The cost of insuring its debt for five years has tripled in recent months.
The cost of the AI race continues to climb
Together, the biggest tech firms raised a record 108 billion dollars in 2025, more than triple the annual average of the previous decade. This pace of borrowing underscores both the intensity of the AI race and the growing financial risks underneath it.
Summary
AI investment is soaring, but the shift toward debt-heavy financing has made the industry more fragile. Investors are increasingly concerned as firms rely on leverage to sustain massive AI buildouts, with Oracle’s credit stress highlighting broader market vulnerabilities.
Food for thought
If AI progress becomes dependent on escalating debt, who bears the risk when the momentum slows?
AI concept to learn: Credit Default Swaps
These are financial contracts that insure investors against a company’s debt default. Their price rises when markets see higher risk. Beginners can think of them as a real-time signal of how safe or shaky a company’s borrowing appears to investors.
[The Billion Hopes Research Team shares the latest AI updates for learning and awareness. Various sources are used. All copyrights acknowledged. This is not a professional, financial, personal or medical advice. Please consult domain experts before making decisions. Feedback welcome!]
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